MGMT1101: Zara's Strategic Analysis: SWOT, Environment, and Structure

This report provides a comprehensive analysis of Zara, a leading clothing retailer, focusing on its strategic management and operational aspects. It begins with a summary of Zara's business, including its founding, global presence, and product offerings. The core of the report is a detailed SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis, evaluating factors such as cost leadership, efficient distribution, and brand recognition. The report then examines environmental constraints, encompassing political, economic, social, technological, legal, and environmental factors that impact Zara's performance. It identifies key stakeholders, including customers, employees, shareholders, and government entities, and discusses their significance. The organizational structure and design of Zara, emphasizing its hierarchical structure, communication flow, and decision-making processes, are also analyzed. Furthermore, the report explores motivational strategies employed by Zara, particularly Maslow's hierarchy of needs. Finally, it suggests control mechanisms, such as KPI indicators and feedback systems, along with recommendations for improving cross-cultural proficiency and interpersonal communication within the company.

Running head Introduction to management 0
Research Analysis-II

Introduction to management 1
Contents
Summary.....................................................................................................................................................2
SWOT- Formulating strategies....................................................................................................................2
Environmental Constraints..........................................................................................................................3
Stakeholders................................................................................................................................................4
Organizational Structure and Design...........................................................................................................5
Motivating Employees.................................................................................................................................7
Controls and Recommendations..................................................................................................................7
Reference.....................................................................................................................................................8

Introduction to management 2
Summary
Zara is one of the leading clothing retailing company. It was founded by Amancio Ortega in
1963. It provides premium quality products for the higher class and middle-class customers. It
operates the business in more than 96 countries and 10,000 stores around the world. In the
Inditex group, Zara is the largest company that provides clothing for men, women, and kids
(Zara, 2019). This report focuses on the formulation of strategies based on the SWOT analysis of
Zara. The environmental constraints will be discussed which affects the performance like
political, legal, social, etc. In the report, the various stakeholders and their importance will be
discussed and its impact will be analyzed. The organizational structure and design will be
analyzed which is followed by Zara like a chain of command, work specialization, decision
making, etc. Motivating the employees, the motivational theories will be explained in the report.
The various recommendations will be provided to the organization for monitoring the
performance of the business plan.
SWOT- Formulating strategies
Strength
For looking into the strengths of Zara, the company is following the cost leadership quality. It is
beneficial for attracting a large number of customers. The company includes efficient
distribution for delivering the products to customers. Supply chain management is effective in
Zara which is beneficial for the organization to manage the distribution effectively (Sitaro,
2010).
The strength of Zara is the information technology which is used for attracting the customers.
Zara is dealing in providing extremely trendy designs and fast delivering the products. The
company Zara has the most recognized brand which helps in increasing the revenues for
attracting the customers.
Weaknesses
The low promotion strategy of Zara is a weakness for making awareness about deals, discounts
and offers so it can be improved by implementing the marketing promotional strategy for
creating awareness and promoting the products of the Zara on large scale. Digital marketing will

Introduction to management 3
be beneficial for the organization to promote the organization and new products in the market.
The weakness of a centralized distribution system can be changed for creating the network and
distribution in the market. The profit margin of the organization can be increased by providing
reasonable products to the customer and making the products affordable to attract new customers
(Tokatli, 2014).
Opportunity
Zara can take advantage of expanding the business in a new market. Zara includes global market
penetration and creating an opportunity in the online market. It is an opportunity for the
organization to expand the market through opening the online stores for the customers. As the
organization is expanding the business in other countries with the help of an effective supply
chain, it will be beneficial for the company for enhancing the market share with the help of
attracting the customers (Kumari, 2019).
Threat
The increase in competition is a threat to Zara. It required to adopt the advance technology for
manufacturing the products for the customers. With the change in the trend, the demand of the
customers also changes which requires t manufacture the of new fashionable clothes for
customers. The company is required to adopt the strategy to go with the trend in manufacturing
clothes. It is necessary for the Zara to go with the trend and does not keep the stock of clothes
which are outdated (Aftab, et al., 2018). In globalization, the local competitors are a threat to the
organization which requires attracting the customers by providing quality clothes and affordable
prices to the customers.
Environmental Constraints
Political: In the organization, the performance is affected because of the political pressures which
include the high wages for the employees. In retailing, the stability of the company is considered
high which helps in extending the market share of the organization.
Economical: the stability in the economy helps the business to grow in the developing countries.
The organization provides job opportunities that help in reducing unemployment in the market.
the economic factors for Zara are trading levels, currency, and employment rate. With the

Introduction to management 4
increase in demand or the products the organization is required to emphasize the fast-growing
economy (Cari, et al., 2010).
Social
Zara is a fashionable brand which requires to provide the good-quality products to the customers.
It helps in gaining healthy profit margins for its shareholders (de Jorge Moreno and Carrasco,
2016). The trend of online shopping is increasing which requires paying more attention to the
performance of its online stores.
Technological
Technological factors impacts on Zara as it is required for expanding the market. The use of big
data helps in providing better ways to reach and appeal to customers. The use of effective
technology is required to go with the trend (de Jorge Moreno and Carrasco, 2016).
Legal
Legal factors impacts on Zara as copyright for capturing the market. Zara is required to focus on
the sustainability and ethics for the business and supply chain. The various laws and required to
be followed for making the business successful in a different market. Zara is focused on creating
an ethical brand image (Briscoe, et al., 2012).
Environmental
Sustainability is the latest trend for the organization. Zara is required to take the initiative for
sustainability. Zara can consume less energy and water in their stores as compared to
competitors. Zara focuses on eliminating hazardous waste from its supply chain system. The fast
fashion industry is considered as one of the biggest promoters of wasteful clothing purchases.
Zara is required to maintain the eco-friendly practices in business.
Stakeholders
Zara’s key stakeholders are customers, employees, shareholders, communities, and government.
Every stakeholder is important for the company but owners in the organization are the important
stakeholder for providing the financial support for operating the business in the market. Zara

Introduction to management 5
directors promote the success of the organization and they are considered as the main
stakeholders (Mesa Pérez, 2017).
Creditors are also considered as the essential stakeholders for the organization which helps in
operating the smooth and effective functioning for the success of the company. Employees of
Zara are the main stakeholders of the organization which helps to achieve the goals by
performing the function. Employees are those who are responsible for dealing with the customers
and attract them which helps in building the brand and increasing the sales of the organization.
Zara gives the major priority to customers as they help in creating value for the company. For
making the potential growth of the business, customers help in guiding the business (Mesa Pérez,
2017).
Organizational Structure and Design
The organizational structure of Zara is a hierarchical flow of subordination of the functional
department. It is a well-organized structure in which employees are able to communicate with
their colleagues easily. It helps in improving efficiency by making the work easy and helps in
increasing the productivity of employees. The senior authorities of Zara like CEO and senior
management team guide the low supervisors. The organizational structure of Zara emphasizes on
the high performance. The number of managerial hierarchy levels and decentralize decision
making are reduced in the multidivisional organizational structure. The hybrid structure is
included in Zara which states that employees are required to report to the store managers and
store managers report to the regional manager and they are linked with the head of Zara (Garro,
2011). Store managers are responsible for communicating with the employees and headquarters.
Employees are given their appropriate roles and department for executing smooth customer
experiences and communication.

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Source: (Saraswat, 2018)
The decisions of the organization are taken by the CEO and the other higher management
authorities for the high degree of centralization. The culture of Zara is focused on teamwork,
open communication and meeting the high level of demand and offers a dynamic and
international environment to employees.
It includes horizontal differentiation which helps in communication flow easily and meeting the
demand of the customers. Zara adopts the easy communication flow which includes adequate
channels (Saraswat, 2018).

Introduction to management 7
Motivating Employees
In order to motivate the employees of Zara, the Maslow hierarchy theory of motivation is
included in fulfilling the basic needs. Zara offers the basic needs for the motivation of employees
like food, water, and safety. For the psychological needs, good relations are maintained between
the employees and management for providing the opportunity and making them feel the part of
the organization. Self-fulfillment needs are also used for motivating the employees which
include providing an effective working environment for employees. For motivation, rewards are
organized for creating positive vibes and work enthusiasm (Śmigielska, 2016).
Controls and Recommendations
In order to measure the performance of the company, Zara can adopt the KPI indicators which
help in evaluating the business plans and activities. The concurrent and feedback control will be
beneficial for monitoring evaluating the performance. By taking the feedback from customers
related to the products and trends helps the organization in improving the business plan.
It is recommended to Zara to adopt the cross-cultural proficiency. Interpersonal communication
must be adopted by the managers of the Zara. In the international market, flexibility and
adaptability must be achieved with the help of analyzing the importance of interpersonal
relationships.

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Reference
Aftab, M. A., Yuanjian, Q., Kabir, N., & Barua, Z. (2018). Super responsive supply chain: The
case of Spanish fast fashion retailer Inditex-Zara. International Journal of Business and
Management, 13(5), 212.
Briscoe, D., Tarique, I. and Schuler, R., 2012. International human resource management:
Policies and practices for multinational enterprises. Routledge.
Caro, F., Gallien, J., Díaz, M., García, J., Corredoira, J. M., Montes, M., ... & Correa, J. (2010).
Zara uses operations research to reengineer its global distribution
process. Interfaces, 40(1), 71-84.
de Jorge Moreno, J., & Carrasco, O. R. (2016). Efficiency, internationalization and market
positioning in textiles fast fashion. International Journal of Retail & Distribution
Management.
Garro, A. (2011). New product demand forecasting and distribution optimization: a case study at
Zara (Doctoral dissertation, Massachusetts Institute of Technology).
Kumari, B. (2019). Merchandise Display and Strategic Zoning Zara, Inditex.
Mesa Pérez, S. (2017). Creativity and Innovation in organizations. Case study: Inditex.
Saraswat, S. (2018). Strategies v/s Consumer Perception of Brand Zara-India. IITM Journal of
Management and IT, 9(2), 68-80.
Sitaro, T. D. (2020). Fast Fashion and Sustainability-The Case of Inditex-Zara.
Śmigielska, G. (2016). The role of an entrepreneur in developing an organizational culture
fostering innovations. Studia Oeconomica Posnaniensia, 4(5), 54-68.
Tokatli, N. (2014). Single-firm case studies in economic geography: some methodological
reflections on the case of Zara. Journal of Economic Geography, 15(3), 631-647.